Bloomberg News

U.S. Durable Goods Orders Probably Fell on Less Aircraft Demand

October 26, 2011

Oct. 26 (Bloomberg) -- Orders for durable goods probably fell in September as a slump at aircraft makers masked gains for companies like Caterpillar Inc. that show manufacturing is supporting the expansion, economists said before a report today.

Bookings for equipment meant to last at least three years dropped 1 percent after decreasing 0.1 percent in August, according to the median forecast of 79 economists surveyed by Bloomberg News. Demand excluding the volatile transportation category rose 0.4 percent, according to the survey.

Growing economies overseas and a 14 percent drop in the value of the dollar since June 2010 are propelling American exports to record levels, helping companies like Caterpillar weather a protracted U.S. housing slump that is restraining the recovery. A second report from the Commerce Department today may show sales of new houses barely budged from a six-month low.

The outlook for manufacturing is “generally positive, but a bit disappointing relative to the beginning of the year when the gains were much more broadly based,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “Growth is still positive, albeit relatively lackluster.”

Estimates for overall orders ranged from a 2.5 percent decline to a 1 percent increase. Forecasts for bookings excluding transportation ranged from a decline of 1 percent to an increase of 1.7 percent. The Commerce Department’s report is due at 8:30 a.m. in Washington.

Home Sales

Purchases of new houses increased in September to a 300,000 annual rate from 295,000 pace in August that was the weakest since February, economists surveyed project the government’s report at 10 a.m. will show.

Boeing Co., the largest U.S. aircraft maker, said it received orders for 59 airplanes in September, down from 127 the prior month. The drop will probably be reflected in the headline reading for durable goods. Industry data, nonetheless, may not correlate with the government statistics on a month-to-month basis.

Other indicators have shown manufacturing, which accounts for about 12 percent of the economy, continues to grow. The Institute for Supply Management’s factory index climbed to 51.6 last month from 50.6 in August. A level greater than 50 signals expansion. Industrial production advanced in September on growing demand for automobiles and computers, according to figures from the Federal Reserve.

Machinery Makers

Stocks of machinery makers have fallen more than the broader market in the last three months on concern the European debt crisis and sluggish U.S. growth might curb demand. The Standard & Poor’s Supercomposite Machinery Index has dropped 16 percent since the end of June, while the S&P 500 Index decreased 6.9 percent in the same period.

The potential drags on growth don’t “signal the onset of recession,” Caterpillar said in an Oct. 24 statement. The world economy will expand 3 percent in 2011 and 3.5 percent in 2012, according to the Peoria, Illinois-based company.

“Although there is a good deal of economic and political uncertainty in the world, we are not seeing it much in our business at this point,” Doug Oberhelman, chairman and chief executive officer, said in a statement. Caterpillar, the world’s largest construction and mining-equipment maker, posted third- quarter profit and sales that topped analysts’ estimates as demand for shovels and drills used to dig up metals rose.

A cheaper dollar, by making American goods more competitive overseas, is helping bolster demand. IntercontinentalExchange Inc.’s Dollar Index, which tracks the currency against those of six major trading partners including the euro, yen and pound, has dropped 14 percent since June 7. July and August were the best month for U.S. exports on record, according to figures from the Commerce Department.

--With assistance from Shruti Singh in Chicago and Chris Middleton in Washington. Editors: Carlos Torres, Vince Golle

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net


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